Question

TRUE/FALSE. a good with many close substitutes is likely to have relativelyelastic correct demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.

Answer 1

Yes, this is true. Close substitutes for a good will make the demand for that good more elastic, since consumers can easily switch to a different good if the price of the original good rises.

The Impact of Close Substitutes on Price Elasticity of Demand

The demand for a good with many close substitutes is likely to be relatively elastic. This is because when the price of the good increases, consumers can easily switch to one of the close substitutes, which limits the effect of the price increase on demand.

For instance:

• If the price of a particular brand of cereal rises, consumers may decide to purchase a different brand of cereal as an alternative, rather than paying the higher price.

This ability to switch to a close substitute reduces the impact of the price increase on demand.

Elasticity is an important concept in economics and can be used to understand how prices and demand interact.

• When demand is elastic, an increase in price will cause a large decrease in demand. This is because consumers have the ability to switch to close substitutes, which limits the effect of the price increase.
• On the other hand, when demand is inelastic, an increase in price will cause only a small decrease in demand. In this case, consumers do not have close substitutes available, so they are more likely to continue purchasing the good despite the price increase.

Learn more about Elasticity of Demand at: brainly.com/question/5078326

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